The Beveridge Report, widely regarded as the founding document of Britain’s welfare state, was released 70 years ago this week. The document had been commissioned 18 months earlier but the timing of its publication was fortuitous.

In late 1942, the American navy halted Japanese expansion in the Pacific, the British army defeated Rommel in north Africa and Russian troops were encircling the German forces at Stalingrad.

While the war would last another 2½ years, its outcome was becoming daily more clear.

The report was an immediate best-seller. Arthur Greenwood, the Labour minister responsible, told the House of Commons that “no document within living memory has made such a powerful impression, or stirred such hopes, as the Beveridge Report”. The treasury, inevitably, opposed it, and Winston Churchill and many other Conservatives expressed reservations. But public opinion forced the wartime coalition government to accept its recommendations.

And so William Beveridge became an iconic figure. For many on the right, he was a utopian who bore substantial responsibility for Britain’s postwar economic decline. For many on the left, subsequent failures of social policy are largely attributable to the failure of successive governments to implement Beveridge’s vision. Neither portrait has much basis in fact.

Beveridge believed in social insurance, a concept created in Bismarckian Germany and reinvented in the US as the “single payer” model. Benefits should be funded through actuarially calculated contributions, but premiums and claims are managed through a single state-sponsored pool.

What people want

Beveridge explained that “benefit in return for contributions, rather than free allowances from the state, is what the people of Britain desire”.

His knowledge of “what the people of Britain desire” had presumably been acquired during his public school education and subsequent career as permanent secretary of the ministry of food, director of the London School of Economics and master of University College, Oxford.

But, to be fair, Beveridge went on to explain that “this desire is shown both by the established popularity of compulsory insurance and by the phenomenal growth of voluntary insurance against sickness, against death and for endowment, and most recently for hospital treatment.

It is shown in another way by the strength of popular objection to any kind of means test. This objection springs not so much from a desire to get everything for nothing, as from resentment at a provision which appears to penalise what people have come to regard as the duty and pleasure of thrift. Management of one’s income is an essential element of a citizen’s freedom.” You would win applause for these sentiments at a Tea Party rally.

What Beveridge proposed looks mean today. The benefit level suggested for a couple was 32 shillings a week (probably about £70 at today’s prices). This was a carefully calculated subsistence income, which was not intended to rise other (perhaps) than with inflation.

Not what happened

The sick and unemployed would acquire benefit through insurance contributions and the elderly would gradually acquire a similar entitlement over their working lifetimes.

Needless to say, this is not what happened. Pensions were introduced immediately after the war, at levels Beveridge had anticipated would be attained in 1967 and increased regularly and substantially. These pensions were paid for, as usual, by contributions from those of working age backed by the promise that pensions would be more generous still in future. Means-tested benefits were retained, and increased with earnings, so that their levels consistently exceeded those of Beveridge’s contributory benefits.

Another strand of thought influenced the postwar welfare settlement. Franklin Roosevelt, with Churchill, set out allied war aims in the Atlantic Charter and Eleanor, Roosevelt’s wife, drew inspiration from this to press for what subsequently became the UN Declaration of Human Rights.

That recital states that: “Everyone has the right to a standard of living adequate for the health and wellbeing of himself and his family including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood.”

Social policy would, in the long run, owe far more to Eleanor Roosevelt’s claim that “everyone has the right to a standard of living” than to Beveridge’s assertion that “management of one’s income is an essential element of a citizen’s freedom”.

– (Copyright The Financial Times Limited 2012)